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Tom Mock Vice President, Strategic Planning May 5, 2004 PowerPoint PPT Presentation


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JP Morgan 32 nd Annual Technology & Telecom Conference. CIENA: Beyond Optical. Tom Mock Vice President, Strategic Planning May 5, 2004. Forward-Looking Statements.

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Tom Mock Vice President, Strategic Planning May 5, 2004

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Tom mock vice president strategic planning may 5 2004

JP Morgan 32nd Annual Technology

& Telecom Conference

CIENA: Beyond Optical

Tom MockVice President, Strategic Planning

May 5, 2004


Forward looking statements

Forward-Looking Statements

This presentation may contain “forward-looking statements.” These statements are based on our expectations and are naturally subject to uncertainty and changes in circumstances. Actual results could vary materially from these expectations. More detailed information about the risks involved in investing in CIENA’s stock are set forth in CIENA’s Quarterly Report on Form 10-Q for the quarter ended January 31, 2004. CIENA is under no obligation (and expressly disclaims any such obligation) to update or alter its forward-looking statements, whether as a result of new information, future events or otherwise.


Agenda

Agenda

  • Where we were

  • What changed?

  • CIENA: Beyond optical

  • CIENA’s Transformation: Beyond the product portfolio


Ciena led the optical core revolution

Long Haul DWDM Transport

Long Haul DWDM Transport

Long Haul DWDM Transport

Long Haul DWDM Transport

Long Haul DWDM Transport

Long Haul DWDM Transport

Core Optical Switching

Core Optical Switching

Core Optical Switching

Core Optical Switching

Core Optical Switching

Core Optical Switching

Long Haul DWDM Transport

Long Haul DWDM Transport

Long Haul DWDM Transport

Long Haul DWDM Transport

Long Haul DWDM Transport

Long Haul DWDM Transport

Core Optical Switching

Core Optical Switching

Core Optical Switching

Core Optical Switching

Core Optical Switching

Core Optical Switching

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

$50

700

700

700

700

700

700

600

600

600

600

600

600

43%

43%

43%

43%

43%

43%

43%

43%

43%

43%

43%

43%

500

500

500

500

500

500

$ / Mbps

$ / Mbps

$ / Mbps

$ / Mbps

$ / Gb/s

400

400

400

400

400

400

99%

99%

99%

99%

99%

99%

99%

99%

99%

99%

99%

99%

$ Millions

$ Millions

$ Millions

$ Millions

$ Millions

$ Millions

$ Millions

$ Millions

$ Millions

$ Millions

$ Millions

$ Millions

$25

$25

$25

$25

$25

$25

$25

$25

$25

$25

$25

$25

300

300

300

300

300

300

16%

16%

16%

16%

16%

16%

16%

16%

16%

16%

16%

16%

36%

36%

36%

36%

36%

36%

36%

36%

36%

36%

36%

36%

200

200

200

200

200

200

Capex

Capex

Capex

Capex

Capex

Capex

100

100

100

100

100

100

$5

$5

$5

$5

$5

$5

$5

$5

$5

$5

$5

$5

0

0

0

0

0

0

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

OPEX

OPEX

OPEX

OPEX

OPEX

OPEX

REVENUE

REVENUE

REVENUE

REVENUE

REVENUE

REVENUE

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

CAPEX

OPEX

OPEX

OPEX

OPEX

OPEX

OPEX

REVENUE

REVENUE

REVENUE

REVENUE

REVENUE

REVENUE

Traditional

Traditional

Traditional

Traditional

Traditional

Traditional

Traditional

Traditional

Traditional

Traditional

Traditional

Traditional

CIENA

CIENA

CIENA

CIENA

CIENA

CIENA

CIENA

CIENA

CIENA

CIENA

CIENA

CIENA

1996

1996

1996

1996

1996

1996

-

-

-

-

-

-

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

-

-

-

-

-

-

2003

2003

2003

2003

2003

2003

1996

1996

1996

1996

1996

1996

-

-

-

-

-

-

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

2000

-

-

-

-

-

-

2003

2003

2003

2003

2003

2003

Acq’d Lightera,

January, 1999

CIENA Led the Optical Core Revolution

Success driven by disruptive economics

Core Network

CoreStream™

CoreDirector™


Ciena s optical portfolio expansion

Acq’d ONI

June 2002

ONLINE™ Metro

MetroDirectorK2™

Acq’d Cyras

Dec 2000

ONLINE Edge

CIENA’s Optical Portfolio Expansion

Access Network

Core Network

Metro Network

CoreStream™

CoreDirector™


Core optical market is in decline

…and spending has shifted to service delivery

The Operators’ “pain point”

has moved…

Core Optical Market is in Decline

Relative cost

of equipment

$650 / Mbps

$18 / Mbps

$650 / Mbps

Alpharetta

Linthicum

  • The core is no longer the primary challenge.

  • Carriers shifting emphasis from CAPEX/OPEX reduction to top-line growth.

  • Protecting voice revenues remains a priority.

  • Service providers looking for strategic partners to deliver profitable broadband services originating from the edge.

Source: Infonetics, Dell’Oro, CIENA Internal Estimates


Network philosophy

Capture revenues by increasing service bundle

Converge functionality to reduce CAPEX

Control network to reduce OPEX

Network Philosophy


Capturing services revenue

VoD/HDTV

Services

Voice/video/

DSL Services

MPLS/ATM/FR

Services

IP

Services

Storage

Services

ONLINE™ Metro

Ethernet

Services

Private Line

Services

MetroDirectorK2™

ONLINE Edge

Capturing Services Revenue

Access Network

Core Network

Metro Network

An intelligent optical core enables an all-service network, but CIENA’s portfolio lacked service delivery platforms customers needed to capture new revenue growth

CoreStream™

CoreDirector™


Ciena s acquisition partnership goals

CIENA’s Acquisition/Partnership Goals

  • Expand addressable market with service delivery platforms

  • Leverage core leadership/strengths

  • Leverage customer base/relationships

  • Improve CIENA’s business model

    • Drive revenue growth

    • Improve gross margins

    • Push toward sustained profitability


Preserve the core expand service portfolio

Preserve the Core; Expand Service Portfolio

Video on Demand

HDTV

VoIP

Ethernet

Storage

Private

Lines

Internet

Access

DSL

IP VPNs

  • Protect brand and customer base by continuing investment in the core at reduced levels

  • Diversify into service delivery with a coherent portfolio

  • Target underserved, high growth segments that leverage CIENA’s brand and customer equity


Disciplined acquisition strategy

Disciplined Acquisition Strategy

Candidates should:

  • Be disruptive to existing network economics

  • Fit with CIENA’s network vision

  • Have adjacency (via customer or technology)

  • Deliver good margin profile

  • Have channel fit or provide new channel

  • Have visible path to #3+ market share in growth market


Capturing services revenue1

VoD/HDTV

Services

Acq’d WaveSmith

June 2003

Voice/video/

DSL Services

DN™ 7

MPLS/ATM/FR

Services

IP

Services

Storage

Services

ONLINE™ Metro

Ethernet

Services

Private Line

Services

MetroDirectorK2™

ONLINE Edge

Capturing Services Revenue

Access Network

Core Network

Metro Network

CoreStream™

CoreDirector™


Disciplined acquisition strategy wavesmith

MultiService Switching

Revenue per $ of CapEx

150%

increase

Traditional

DN

Applications:

DSL Aggregation, VoD, ATM,Frame Relay

Disciplined Acquisition Strategy - WaveSmith

Acquisition/Partner candidates should:

  • Be disruptive to existing network economics

  • Fit with CIENA’s network vision

  • Have adjacency (via customer or technology)

  • Deliver good margin profile

  • Have channel fit or provide new channel

  • Have visible path to #3+ market share in growth market


Capturing services revenue2

VoD/HDTV

Services

Voice/video/

DSL Services

DN™ 7

MPLS/ATM/FR

Services

IP

Services

Acq’d Akara

Aug 2003

CN™ 2000

Storage

Services

ONLINE™ Metro

Ethernet

Services

Private Line

Services

MetroDirectorK2™

ONLINE Edge

Capturing Services Revenue

Access Network

Core Network

Metro Network

CoreStream™

CoreDirector™


Disciplined acquisition strategy akara

SONET/SDH Storage

Revenue per $ of CapEx

230%

increase

Traditional

CN 2000

Applications

Storage extension, Access WDM, Low-Cost Ethernet Transport

Disciplined Acquisition Strategy - Akara

Acquisition/Partner candidates should:

  • Be disruptive to existing network economics

  • Fit with CIENA’s network vision

  • Have adjacency (via customer or technology)

  • Deliver good margin profile

  • Have channel fit or provide new channel

  • Have visible path to #3+ market share in growth market


Capturing services revenue3

VoD/HDTV

Services

Laurel Partnership

Sept 2003

Voice/video/

DSL Services

Internet Photonics

Catena

DN™ 7

MPLS/ATM/FR

Services

IP

Services

CN™ 2000

ST™ (Laurel)

Storage

Services

ONLINE™ Metro

PacketWave™ (Luminous)

Ethernet

Services

Private Line

Services

MetroDirectorK2™

Luminous Partnership

Sept 2003

ONLINE Edge

Capturing Services Revenue

Access Network

Core Network

Metro Network

CoreStream™

CoreDirector™


Background

Background

  • Acquisition closed May 3, 2004.

  • 75.9 million shares of CIENA Common Stock issued.

  • Majority of shares not subject to lock-up.

  • A leading innovator in the broadband access market

  • Customers

    • Three RBOCs (including Bell South)

    • Major IOCs

    • CLECs

  • Products

    • CNX-5

    • CN1000

    • CN1000FX

Yankee Group: Overall broadband equipment revenues in the access area will present a market opportunity in excess of $7.5 billion


Background1

Background

  • Acquisition closed May 3, 2004.

  • 24.1 million shares of CIENA Common Stock issued.

  • No lock-up.

  • A leading supplier of carrier-grade optical Ethernet transport and switching solutions

  • Customers

    • Six of the top ten U.S. cable operators (including Cablevision, Cox, Adelphia)

    • Carriers such as TDS Metrocom deploying Ethernet private-line services

  • Products

    • LightStack MXA

    • LightStack MX

    • LightStack GSLAM

    • LightHandler

Infonetics Research: Worldwide Ethernet services market will grow from approximately $2.9 billion in 2003 to $7.5 billion by 2007.


Ciena s transformation beyond the product portfolio

CIENA’s Transformation: Beyond the Product Portfolio

  • Shifting investment to access/service delivery from core

    • Goal of reducing ongoing opex (exclusive of Catena/IPI) by 10% to 20% in FY ’04

    • Announced facilities consolidation and associated headcount reduction affecting 425 employees (~25% of CIENA’s workforce prior to Catena/IPI) on April 20, 2004

    • 2002-2003 investments will enable us to maintain core leadership

  • Manufacturing nearly 100% outsourced

    • Currently working to consolidate contract manufacturers

  • Services business restructured to profitability

  • Sales force revamped to include skills/experience required for broader portfolio

  • 30+ channel partners developed to target enterprise opportunities/new geographies


Transforming ciena to encompass broadband service delivery

FY ’01

$1.6 billion

FY ’02

$361 million

Core Networking

Service/Tech Support

Metro Networking

Solutions & Software

Transforming CIENA to Encompass Broadband Service Delivery

From (2003)

To Include (2005)

CAPEX/OPEX Savings

Service Revenues

Value Proposition

Technologies

Core Optical

Broadband Edge & Access

High Quality/Low Volumes

Direct Sales Only

Low Cost/High Volumes

Channels/Enterprise Pull

Competencies

FY ’03

$283 million

FY ’04

(stated goal

prior to Catena & IPI)

Data Networking/

Service Delivery

T.B.D.


Thank you

Thank You!


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